1

Suppose

  • I purchase something from a company, and I get some rebate.

  • I open an account with a bank, and I get some bonus.

Questions (for The United States)

  1. To me, are rebate and bonus taxable income when I report my personal income tax in 1040 form?
  2. To the company, is the rebate excluded when calculating its taxable income?
  3. To the bank, is the bonus excluded when calculating its taxable income?

Thanks and regards!

5

The classic case of getting a toaster from the bank is treated as interest. So it will be taxable income for the customer.

For the rebate, or for that matter a coupon, it is not a taxable event for the customer. They are just a complicated sale.

For the bank, the toaster is interest they are paying.

For the company I am not sure if the rebate reduces their income, or increases their expenses.

  • Thanks! "For the bank, the toaster is interest they are paying", does the bonus/toaster reduce the bank's taxable income? – Tim Apr 22 '12 at 13:47
  • The toaster is treated like all the other dividends/interest they pay. The fact that it is an item and not an electronic transaction is immaterial. – mhoran_psprep Apr 22 '12 at 13:50
  • Thanks! Does dividends/interest they pay reduce their income before computing their tax? – Tim Apr 22 '12 at 13:58
  • 1
    +1 There's a current case with Citibank tied to bonus miles given on an airline. Since the miles were for opening the account, they are income. In the normal course of monthly charges, they'd be a (tax-free) rebate. – JoeTaxpayer Apr 22 '12 at 14:20
  • 1
    Dilip, understood. I believe the Citibank situation was they offered a bonus simply for opening the account. The bonus based on usage should still be considered a rebate. – JoeTaxpayer Apr 22 '12 at 19:27

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.